The Factor Structure in Equity Options

• 成果类型: Article
• 署名作者: Christoffersen, Peter; Fournier, Mathieu; Jacobs, Kris
• 署名单位: University of Toronto; Copenhagen Business School; Universite de Montreal; HEC Montreal; University of Houston System; University of Houston
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhx089
• 发表日期: 2018
• 页码: 595
• 关键词: stochastic volatility; term structure; risk premia; models; INFORMATION; DYNAMICS; MARKETS; fears; GARCH; price

摘要

Equity options display a strong factor structure. The first principal components of the equity volatility levels, skews, and term structures explain a substantial fraction of the cross-sectional variation. Furthermore, these principal components are highly correlated with the S&P 500 index option volatility, skew, and term structure, respectively. We develop an equity option valuation model that captures this factor structure. The model predicts that firms with higher market betas have higher implied volatilities, steeper moneyness slopes, and a term structure that covaries more with the market. The model provides a good fit, and the equity option data support the model's cross-sectional implications.